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Will the Xi-Trump Summit Be Over Before It Starts? · Trumponomics

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: We're doing a lot of business with and making a
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  Speaker 2: lot of money. It's different than it used to be.
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  Speaker 2: But I'll be talking about that'll be one subject. But
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  Speaker 2: he's been very nice about this. You know, in all fairness,
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  Speaker 2: he gets like sixty percent of his oil from hormones,
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  Speaker 2: and he's been I think he's been very respectful. We
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  Speaker 2: haven't been challenged by China our challenges.
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  Speaker 3: I'm Stephanie Flanders, head of Government and Economics at Bloomberg,
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  Speaker 3: and this is Trumpnomics, the podcast that always looks at
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  Speaker 3: the economic world of Donald Trump, how he's shaking up
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  Speaker 3: the global economy, and what on earth is going to
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  Speaker 3: happen next. This week, we're looking ahead to what could
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  Speaker 3: be one of the more consequential meetings of the year
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  Speaker 3: if it happens. That's the long anticipated, already once rescheduled
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  Speaker 3: summit between President Donald Trump and President Shijingping in China
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  Speaker 3: in two weeks time now. President Trump has said this
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  Speaker 3: week he's still looking forward to meeting his Chinese counterpart,
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  Speaker 3: Si Jingping, and officials in the White House and Beijing
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  Speaker 3: have been preparing for this high stakes conversation for months.
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  Speaker 3: But in that period, the administration has also decided to
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  Speaker 3: start a war in Iran that has brought fresh trains
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  Speaker 3: between the two countries. It's choked off a major source
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  Speaker 3: of energy for China and its neighbors, and offered an
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  Speaker 3: opportunity for China to once again painted itself as a
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  Speaker 3: more reliable global citizen than the US. In the past
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  Speaker 3: few days, Iran related tensions have also ratcheted up again,
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  Speaker 3: as China has taken the unprecedented step of ordering its
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  Speaker 3: companies not to abide by US sanctions on private refiners
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  Speaker 3: involved in trading Iranian oil. It's a pretty brazen attack
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  Speaker 3: on the legitimacy of US sanctions. So will Trump and
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  Speaker 3: she actually sit down this month, and if they do,
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  Speaker 3: what's left to agree on? Well, we're recording this Wednesday morning,
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  Speaker 3: DC time, and it's really quite possible that the summit
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  Speaker 3: might have been canceled or postponed again by the time
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  Speaker 3: you hear this. But if so, I would encourage you
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  Speaker 3: not to turn off, but to view the next thirty
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  Speaker 3: minutes or so as providing valuable insights into why that happened.
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  Speaker 3: Because we do have in our DC studio to extremely
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  Speaker 3: well placed experts on US China diplomacy. Jenny Welch, the
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  Speaker 3: chief geoeconomics analyst for Bloomberg Economics who's been on the
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  Speaker 3: show before. She previously served as the director for China
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  Speaker 3: and Taiwan on the US National Security Council under the
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  Speaker 3: Biden and Trump administrations. She was also an advisor to
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  Speaker 3: Vice Presidents Harris and Pence on Asia and the Pacific. Jenny,
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  Speaker 3: thanks again for joining us, Thank you for having me,
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  Speaker 3: and usually in Hong Kong, and we've certainly heard him
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  Speaker 3: from there on occasion, but now in DC this week.
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  Speaker 3: Down ten Kate, Bloomberg executive editor who run all of
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  Speaker 3: our economics and politics coverage in Asia.
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  Speaker 4: Dan, thanks for coming, Thanks for having me.
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  Speaker 3: Do you think this is going to happen? What are
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  Speaker 3: the probabilities? I know you wrote on this yesterday, but
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  Speaker 3: what probability are you putting on this now happening on
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  Speaker 3: the kind of time frame that we were expecting.
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  Speaker 1: I tend to lean a little bit towards the meeting
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  Speaker 1: going forward as planned, and I think the main reason
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  Speaker 1: for that is that it's a relatively low cost way
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  Speaker 1: for both sides to maintain stability, and both of them
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  Speaker 1: have an interest in that, especially given all the headwinds
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  Speaker 1: they're facing at home and from the energy disruptions caused
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  Speaker 1: by the Iran War. That being said, as you mentioned, Stephanie,
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  Speaker 1: there are also a lot of friction points that are
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  Speaker 1: continuing to build, including over the war itself. China is
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  Speaker 1: not happy about the blockade, which is affecting a major
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  Speaker 1: source of energy imports for it coming through her moves.
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  Speaker 1: It is not happy about US pressure on a run
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  Speaker 1: and particularly recent US sanctions targeting is private, refined and
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  Speaker 1: more broadly, I think China is not happy to be
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  Speaker 1: hosting a major diplomatic summit in the midst of the
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  Speaker 1: US carrying out whether Washington says it still is or not,
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  Speaker 1: what the world precedes as a major military campaign in
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  Speaker 1: the Middle East.
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  Speaker 3: And I guess, yeah, so it's sort of rather it
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  Speaker 3: wasn't happening, but given that it is, they also would
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  Speaker 3: see significant costs to putting it off, for canceling.
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  Speaker 1: It, that's right. I think there is the risk that
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  Speaker 1: a could turn from just a diplomatic snafu into a
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  Speaker 1: larger friction point in the relationship, and that comes in
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  Speaker 1: a moment where while China's insulated itself from the effects
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  Speaker 1: of the Iran war through its reserves, its energy diversification.
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  Speaker 1: It's still facing costs, and it's still worried about the
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  Speaker 1: impact this war will have on its ability to sell
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  Speaker 1: its exports around the world. And so all that is
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  Speaker 1: to say, I think they would not necessarily want a
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  Speaker 1: trade fight if they can avoid it with the United States. Certainly,
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  Speaker 1: they would wage it if they felt they had to,
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  Speaker 1: but hosting Trump is relatively low cost way of potentially
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  Speaker 1: avoiding that outcome.
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  Speaker 3: Dan Jenny's obviously kind of thinking about both perspectives, having
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  Speaker 3: spent a lot of time sort of advising US administrations
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  Speaker 3: on how China is looking at things. But you know,
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  Speaker 3: you're normally sitting in Hong Kong. How do you think
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  Speaker 3: that the Chinese authorities will be viewing the summit and
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  Speaker 3: the decision to potentially postpone or delay.
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  Speaker 4: I agree with Jenny, definitely, it's not the preferred time
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  Speaker 4: to be having a summit. Chi Jiping will often say
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  Speaker 4: things to leaders, like when he dressed down Justin Trudeau
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  Speaker 4: at the G twenty in Bali a couple of years ago.
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  Speaker 4: You know, we need to create the right conditions for
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  Speaker 4: the relationship and this is not the right conditions. It
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  Speaker 4: definitely puts them in an awkward position in terms of
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  Speaker 4: what do you do on the ground. They like to
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  Speaker 4: just make sure that everything is stage managed. They measure
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  Speaker 4: out the distance that Hi Jiping needs to walk from
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  Speaker 4: point A to point B. The they don't like any surprises,
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  Speaker 4: so dealing with Trump normally, there's so many unknowns when
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  Speaker 4: it comes to that that you're not quite sure what
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  Speaker 4: he's going to say, and you're trying to stage manage
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  Speaker 4: the whole thing. So it just adds an element of
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  Speaker 4: uncertainty that they don't like. But they also do have
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  Speaker 4: a way of looking at the bigger picture, and the
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  Speaker 4: bigger picture is the US is still an important market.
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  Speaker 4: Their economy is still heavily reliant on exports in a
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  Speaker 4: stable external environment. They're also that the host APEC later
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  Speaker 4: in the year, Trump is going to host the G twenty.
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  Speaker 4: They're supposed to meet three more times after this, so
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  Speaker 4: to keep that all on track, this meeting has to
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  Speaker 4: happen at some point or otherwise it gets to rail
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  Speaker 4: and this truce is said to expire in November unless
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  Speaker 4: you extend it. And so for all those reasons, there's
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  Speaker 4: a lot of reasons to go forward with this meeting,
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  Speaker 4: even if it's not an optimal time.
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  Speaker 3: Chinese could maybe take some advice from the palace, given
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  Speaker 3: that you've had the planning for the King's visit in DC.
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  Speaker 3: I suspect was there were very similar concerns. I suspect
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  Speaker 3: the Chinese will be kind of thinking through similar ways
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  Speaker 3: to reduce the amount of time for any kind of
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  Speaker 3: anything surprising to happen. I do want to get into
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  Speaker 3: what they might talk about, what the to use the
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  Speaker 3: phrase is much loved in these kind of discussions. Deliverables
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  Speaker 3: might be from the summit, be good to get a
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  Speaker 3: sense of this. More recent news in the last week
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  Speaker 3: that I mentioned at the top that China ordering its
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  Speaker 3: companies to ignore US sanctions, the sanctions that were on
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  Speaker 3: refiners that had been linked to refining Iranian oil. How
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  Speaker 3: unprecedented is that because we've heard the Chinese before kind
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  Speaker 3: of complain about US sanctions, say they're not legitimate. But
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  Speaker 3: what's new in this move?
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  Speaker 4: Yeah, I mean we have seen this before, particularly in
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  Speaker 4: Hong Kong where I'm based, during the protest or the
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  Speaker 4: twenty twenty after the National Security Law that specifically says
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  Speaker 4: that China, these companies should not comply with US sanctions,
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  Speaker 4: and banks were in effect being forced to choose do
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  Speaker 4: you comply with the US or do you comply with
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  Speaker 4: the National Security law? And even Chinese state run banks
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  Speaker 4: were complying with US sanctions then because they didn't want
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  Speaker 4: to be cut off from the dollar system. So there
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  Speaker 4: is a little bit of a dance where what they
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  Speaker 4: say and what they do can be two different things sometimes.
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  Speaker 4: I think what's different now is that China has stood
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  Speaker 4: up to Trump, particularly last year. They have the showed
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  Speaker 4: the leverage they have with by cutting off rare earths,
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  Speaker 4: and that's still there, so they're in a relatively stronger
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  Speaker 4: position to say things like, hey, we're going to dare you,
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  Speaker 4: essentially to put sanctions on our banks, and that's going
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  Speaker 4: to blow up the relationship, and do you want to
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  Speaker 4: blow up the relationship now? Rubio was giving a briefing
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  Speaker 4: year in Washington yesterday where he said, we don't put
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  Speaker 4: sanctions on to be symbolic, and we are going to
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  Speaker 4: enforce them. But you know, from the Chinese perspective, they
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  Speaker 4: know that Trump wants the summit and doesn't want things
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  Speaker 4: to blow up. He's got enough problems on his plate.
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  Speaker 4: Now if we see them trying to squeeze Taiwan a
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  Speaker 4: bit more as well, so it's an opportune time in
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  Speaker 4: their mind to say, Okay, we'll call your bluff on
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  Speaker 4: this one and do you go ahead? And it potentially
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  Speaker 4: could royal the relationship, could royal markets. Certainly we'll have
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  Speaker 4: an impact on China as well. But if you're going
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  Speaker 4: to take a stand, you know, why not, especially ahead
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  Speaker 4: of the summit.
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  Speaker 3: It feels like a sign of the times, Jenny. If
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  Speaker 3: the previous situation was that the Chinese in public would
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  Speaker 3: say they don't respect these sanctions, but in private would
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  Speaker 3: largely kind of turn a blind eye to their biggest
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  Speaker 3: companies abiding by sanctions in order to stay in the
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  Speaker 3: US system, and for all those reasons, if we're now
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  Speaker 3: in a reverse situation where it's actually the US that
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  Speaker 3: has to kind of turn a blind eye to countries
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  Speaker 3: just ignoring the writ of America because it no longer
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  Speaker 3: has the same kind of weight, I mean, that's something
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  Speaker 3: that we're not just seeing in China.
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  Speaker 1: No, I think that's true. I think too, what this
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  Speaker 1: situation really underscores is the shift in leverage between the
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  Speaker 1: United States and China over the last year. I can't
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  Speaker 1: underscore enough the impact of China's use of its grip
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  Speaker 1: over critical minerals to put the ONUS back on Washington
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  Speaker 1: last year during the height of the trade war and
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  Speaker 1: push Washington towards the negotiating table, push it towards a
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  Speaker 1: pause that eventually led to the Bussan meeting and a
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  Speaker 1: more enduring truce that had a real psychological effect on Washington,
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  Speaker 1: and demonstrating China's trump card. And it's a trump card
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  Speaker 1: that even though Beijing has put a pause on some
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  Speaker 1: of those measures, it hasn't fully rolled them back. In fact,
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  Speaker 1: it's continuing to gather information from every company that imports
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  Speaker 1: Chinese critical minerals on how they're using it and what
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  Speaker 1: specifically they use them for. So all of that is
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  Speaker 1: information that China could very quickly use again if it felt,
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  Speaker 1: for example, that the US is not respecting its interest.
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  Speaker 1: And I think that that really casts a shadow over
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  Speaker 1: policymaking in this administration. You've seen them be very careful about,
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  Speaker 1: for example, how China is referred to, and everything from
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  Speaker 1: the National Defense strategy to future export control rules. And
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  Speaker 1: I think it's also likely to be a factor in
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  Speaker 1: how the US is approaching this meeting.
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  Speaker 3: In particular, we had a fantastic bit of research that
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  Speaker 3: was out about a week ago from your colleagues Nicole
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  Speaker 3: Gordon Carottelli and Chris Kennedy, just looking at how much
• 11:32
  Speaker 3: rare earths are implicated in the US economy. And it's
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  Speaker 3: an incredibly complicated bit of work because it's going through
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  Speaker 3: not just the direct use but the indirect use, so
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  Speaker 3: you have to really get under the hood. But they
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  Speaker 3: find that four percent of US GDP is implicated at
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  Speaker 3: one point true trillion dollars, and although some of them
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  Speaker 3: can be substituted for rareers from other parts of the world,
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  Speaker 3: there's actually about one and a half percent of that
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  Speaker 3: which just can't substituted. China's the only source. So it
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  Speaker 3: really really showed us why that is such an important
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  Speaker 3: bit of leverage. Dan, I remember talking to you she
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  Speaker 3: when I was in Hong Kong earlier in the year,
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  Speaker 3: and we were talking about the sort of relative balance
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  Speaker 3: of power, the shifting ground underneath the US and China.
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  Speaker 3: I mean, it's not just a ran that's happened since then.
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  Speaker 3: We've also seen the overturning of a lot of the
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  Speaker 3: tariffs that had been put on China. China's now got
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  Speaker 3: a big advantage relative to the start of the year
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  Speaker 3: in the tariff rate that it's facing going into the US.
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  Speaker 3: What are you looking for if this meeting does go ahead?
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  Speaker 3: What's possible on the trade front?
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  Speaker 4: The US has the three oh one investigations ongoing, and
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  Speaker 4: they vowed to rebuild this tariff wall. So I think
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  Speaker 4: China's big concern now is that it doesn't get rebuilt
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  Speaker 4: in a way that they see US going beyond what
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  Speaker 4: was there before, and they just want to issue some
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  Speaker 4: warnings there. So there is some uncertainty hanging over what
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  Speaker 4: that rate is going to be or what that picture
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  Speaker 4: looks like. And I think until you start that out,
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  Speaker 4: it's really hard to go beyond that. And this notion that, Okay,
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  Speaker 4: they've made this truce, and then they were talking about
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  Speaker 4: how can we build off of that truce? Can we
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  Speaker 4: actually do some bigger things with the economy. Can we
• 13:18
  Speaker 4: sell more advanced chips into China? You have the h
• 13:21
  Speaker 4: two hundreds ready to go, not many have been shipped yet.
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  Speaker 3: They're not the super important the Blackwell chips. They're sort
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  Speaker 3: of one down from there.
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  Speaker 4: Right, You've got the Blackwells, got the Rubens, there are
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  Speaker 4: a couple generations back. We don't see that there's going
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  Speaker 4: to be anything further in that area. And then the
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  Speaker 4: question is can you get a big Chinese investment package
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  Speaker 4: in the US. There was some talk of are they
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  Speaker 4: going to you know, if anyone, I guess Trump could
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  Speaker 4: totally flip the script and say, you know, we're going
• 13:49
  Speaker 4: to welcome massive BYD investments and electric vehicles and things
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  Speaker 4: like that, But there doesn't seem to be anything on
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  Speaker 4: the cards there. The national security restriction are still in
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  Speaker 4: place on a lot of those things. You have pent
• 14:03
  Speaker 4: up demand for Boeing airplanes and it looks like a
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  Speaker 4: deal there might go through, And of course that also
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  Speaker 4: gives China leverage with Airbus. If you're just buying from
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  Speaker 4: one supplier, you don't have much leverage there. So that
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  Speaker 4: also helps the Chinese in a way film demand that
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  Speaker 4: they already have and gives them some negotiating leverage against Airbus.
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  Speaker 4: You're very still in the straight jacket of national security
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  Speaker 4: restrictions that limit how far you can go either way
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  Speaker 4: on the trade investment front and out some wins, but
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  Speaker 4: I don't see anything that would really move the needle
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  Speaker 4: to break through those restrictions that we've seen.
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  Speaker 3: Jenny, the bad news for you is that you're going
• 14:39
  Speaker 3: to have to be quite focused all this summit if
• 14:41
  Speaker 3: it does go ahead for the next two weeks, and
• 14:43
  Speaker 3: get people excited about soybeans as well as maybe the
• 14:47
  Speaker 3: old Boeing jet.
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  Speaker 1: Yes, I think that's right. I think the ambition is
• 14:50
  Speaker 1: relatively low for it. That being said, obviously President Trump
• 14:53
  Speaker 1: would trumpet it as a major foreign policy win, major deliverables,
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  Speaker 1: but as with so many things, all of it depends
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  Speaker 1: on the execution.
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  Speaker 3: Right.
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  Speaker 1: There were a lot of promises made in Bussan last year,
• 15:04
  Speaker 1: and I think we're still waiting to see how some
• 15:06
  Speaker 1: of those turn out, including on soybean purchases. The Chinese
• 15:09
  Speaker 1: fulfilled the requirement to purchase I think it was twelve
• 15:12
  Speaker 1: million metric tons by February of this year, but they're
• 15:15
  Speaker 1: on the hook to buy about twenty five million by
• 15:17
  Speaker 1: the end of this year, and they think is a
• 15:20
  Speaker 1: huge question, especially for US farmers, when do those orders
• 15:24
  Speaker 1: come in, because it makes a big difference on whether
• 15:26
  Speaker 1: they come in now or whether they come in closer
• 15:28
  Speaker 1: towards the end of the year, which is when Beijing
• 15:30
  Speaker 1: might have an incentive to do it. You don't want
• 15:32
  Speaker 1: to frontload all those orders and lose all your leverage.
• 15:35
  Speaker 1: So there are just a number of friction points in
• 15:37
  Speaker 1: the relationship, and I think that this meeting would help
• 15:40
  Speaker 1: to provide some stability and additional time to work through those,
• 15:44
  Speaker 1: but it's not going to probably resolve all of them,
• 15:47
  Speaker 1: including because the President in the United States is not
• 15:50
  Speaker 1: the only actor here. You have Congress, for example, considering
• 15:53
  Speaker 1: laws that would restrain his ability to do some of
• 15:56
  Speaker 1: the things he's talking about, including on Chinese vehicles in
• 15:59
  Speaker 1: the United States.
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  Speaker 3: Dan, you said something on a news call earlier today
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  Speaker 3: that made me think about it slightly differently. So we've
• 16:06
  Speaker 3: talked about, you know, the leverage that China has kind
• 16:09
  Speaker 3: of now exercised when it comes to rare earths. We
• 16:13
  Speaker 3: tend to feel quite beholden to China's extremely cheap evs
• 16:19
  Speaker 3: and solar panels and all these things that are incredibly
• 16:22
  Speaker 3: useful in the world, and right now, especially in Europe,
• 16:24
  Speaker 3: as people are trying to avoid higher energy costs. But
• 16:27
  Speaker 3: I guess on the other side, what's happened in the
• 16:29
  Speaker 3: last few months is We've really seen the power of
• 16:31
  Speaker 3: some of these AI tools, including some of the things
• 16:34
  Speaker 3: we discussed it on the show a couple of weeks ago,
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  Speaker 3: things like Mythos coming out of Anthropic. The US does
• 16:40
  Speaker 3: seem to have the lead still on these very potent
• 16:44
  Speaker 3: forms of AI. Is that something that Donald Trump sort
• 16:47
  Speaker 3: of has in his favor or you know, gives him
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  Speaker 3: a little bit more leverage, or at least the US
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  Speaker 3: has a bit more standing going into this. It's not
• 16:56
  Speaker 3: all on China's side.
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  Speaker 4: Yeah, I think that's right, And I've been struck by
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  Speaker 4: that in conversations I've had here in Washington with some
• 17:05
  Speaker 4: people in this space who see that as something that
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  Speaker 4: China would be very concerned about obviously, and imagine it
• 17:15
  Speaker 4: was the other way around, where China had this AI
• 17:17
  Speaker 4: tool that could penetrate any defenses and they would be
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  Speaker 4: very freaked out about that. We have actually tried to
• 17:25
  Speaker 4: get reporting on this from the Chinese side, and they've
• 17:28
  Speaker 4: been very very quiet on it, which suggests they're very
• 17:31
  Speaker 4: concerned about it. And I think that that is one
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  Speaker 4: of the things where that also gives China an incentive
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  Speaker 4: for the meeting to go forward to keep things stable
• 17:40
  Speaker 4: there how the US would use that, whether they would
• 17:44
  Speaker 4: use it for leverage. These are all questions I don't
• 17:47
  Speaker 4: think we know totally right now. But even if you
• 17:50
  Speaker 4: have a two month lead or something like that before
• 17:53
  Speaker 4: China develops a similar tool, there is an interest either
• 17:56
  Speaker 4: way in preventing rogue actors from get this and putting
• 18:01
  Speaker 4: some sort of guardrails on it. And I think to
• 18:04
  Speaker 4: the Hawks point it does from what I understand here,
• 18:08
  Speaker 4: is that it has given the Trump administration a new
• 18:11
  Speaker 4: appreciation of the need to maintain a lead on China
• 18:15
  Speaker 4: in these areas. So in a sense that you know,
• 18:20
  Speaker 4: it's helped focus the mind. Instead of hey, let's give
• 18:23
  Speaker 4: them all these advanced chips, it's like, oh, these weapons
• 18:26
  Speaker 4: are actually really powerful and could cause widespread destruction and
• 18:30
  Speaker 4: give us leverage in the real world. So that's a
• 18:33
  Speaker 4: good thing. Like let's keep that advantage and press it
• 18:36
  Speaker 4: a little bit sore. I think there has been a
• 18:39
  Speaker 4: little shift in that regard.
• 18:52
  Speaker 3: Jenny. We should say it's pretty unusual to have a
• 18:55
  Speaker 3: US president go to China. I mean, the last one
• 18:58
  Speaker 3: to go, most recent one to go was do Trump
• 19:00
  Speaker 3: in twenty seventeen, nearly a decade ago. Are we sort
• 19:04
  Speaker 3: of underestimating just symbolically how significant it is. I mean,
• 19:08
  Speaker 3: why is it so rare for a US president to
• 19:10
  Speaker 3: go to China.
• 19:10
  Speaker 1: I would say it's rare now, it didn't always used
• 19:13
  Speaker 1: to be, and it didn't always used to be rare
• 19:15
  Speaker 1: for Chinese leaders to come to the United States. Hi Jimping.
• 19:18
  Speaker 1: It's been sometimes since he made a state visit to
• 19:20
  Speaker 1: the United States, although as Dan mentioned, that might happen
• 19:23
  Speaker 1: later this year. And what's interesting too, is I think
• 19:27
  Speaker 1: that President Trump was the last president to visit in
• 19:30
  Speaker 1: twenty seventeen. It wasn't something that was seriously discussed during
• 19:34
  Speaker 1: the Biden administration. There was no discussion of a trip
• 19:37
  Speaker 1: one way or the other. And President Trump might be
• 19:40
  Speaker 1: the last president to visit China again for some time.
• 19:43
  Speaker 1: It's hard to imagine a president from either political party
• 19:47
  Speaker 1: being willing to especially to visit China where you're sort
• 19:51
  Speaker 1: of giving that country the opportunity to play host and
• 19:55
  Speaker 1: to project its global clout, and a moment when both
• 19:59
  Speaker 1: PARTI still seem to largely believe that China is a
• 20:03
  Speaker 1: strategic rival and are very focused on the competition, even
• 20:06
  Speaker 1: though President Trump has a different framing for that most
• 20:09
  Speaker 1: Republicans in congres are still adhere to that, and so
• 20:12
  Speaker 1: I think whoever is likely to follow him into the
• 20:14
  Speaker 1: White House might face some of the same political headwinds
• 20:18
  Speaker 1: other presidents have faced in contemplating either hosting or certainly
• 20:22
  Speaker 1: visiting Beijing.
• 20:24
  Speaker 3: My sense from talking to you before is that what
• 20:26
  Speaker 3: would usually happen in the lead up to a summit
• 20:29
  Speaker 3: is actually things go relatively quiet. That you've mentioned in
• 20:32
  Speaker 3: the past that you'd often have a reduction in activity
• 20:36
  Speaker 3: around Taiwan. You know, there's all these things just to
• 20:38
  Speaker 3: kind of smooth smooth the waters. It feels like it's
• 20:41
  Speaker 3: kind of been the opposite in the last few weeks.
• 20:43
  Speaker 3: I mean, partly thanks to Iran, but it doesn't seem
• 20:46
  Speaker 3: like China's making an effort on that front. If anything,
• 20:50
  Speaker 3: there's been an effort to throw a bit more weight
• 20:52
  Speaker 3: around in advance of this trip.
• 20:55
  Speaker 1: I think that's exactly right. So normally you do see
• 20:57
  Speaker 1: in advance of a visit or a major meeting, both
• 21:00
  Speaker 1: sides sort of taking steps, as Dan mentioned, to create
• 21:02
  Speaker 1: the proper conditions for the meeting to happen and be successful.
• 21:06
  Speaker 1: And I will say I think the Trump administration was
• 21:09
  Speaker 1: largely doing that when it came to specifically China issues
• 21:13
  Speaker 1: and bilateral issues, so things like export controls again I
• 21:17
  Speaker 1: mentioned National Defense strategy, Taiwan arm sales. There was a
• 21:21
  Speaker 1: lot of restraint that seemed to be exercised on those fronts.
• 21:24
  Speaker 1: But when it came to the Iran war, because that
• 21:26
  Speaker 1: is President Trump's priority, China was kind of collateral damage, right,
• 21:30
  Speaker 1: and so I don't think the administration was considering the
• 21:33
  Speaker 1: China factor. It certainly wasn't considering it a priority when
• 21:37
  Speaker 1: it came to decisions like the blockade, like the sanctions
• 21:40
  Speaker 1: on Iran's oil trade, and I think you're likely to
• 21:43
  Speaker 1: see that continue, that he's not necessarily going to hold
• 21:46
  Speaker 1: off on Iran related actions out of concern for Beijing's
• 21:49
  Speaker 1: feelings on this, and I think what you see from
• 21:51
  Speaker 1: Beijing is a response to that and saying things like, well,
• 21:55
  Speaker 1: if you're going to do this, we're going to use
• 21:57
  Speaker 1: our blocking rules. If you're going to do this, then
• 21:59
  Speaker 1: we're going to host a runs foreign minister in Beijing
• 22:02
  Speaker 1: just beforehand to talk about the war. And those are
• 22:06
  Speaker 1: all the potential friction points that again, it could not
• 22:10
  Speaker 1: delay the meeting, but you could certainly see them presenting
• 22:13
  Speaker 1: a speed bump to it going forward.
• 22:15
  Speaker 3: Dan's the last word for you, because you're going to
• 22:17
  Speaker 3: be the one when you get back. I suspect you'll
• 22:18
  Speaker 3: be continuing to write your plans for the team on
• 22:23
  Speaker 3: how to report on this summit. We tend to say,
• 22:26
  Speaker 3: and you said at the start, you know they've got
• 22:28
  Speaker 3: a very different approach to things. You've got a leader
• 22:32
  Speaker 3: in China who is not really focused on relationships, very
• 22:36
  Speaker 3: we are told, wants everything to be nailed down in advance,
• 22:40
  Speaker 3: doesn't like surprises. President Trump is, you know, famously exactly
• 22:44
  Speaker 3: the opposite. But I can't help remembering when there was
• 22:46
  Speaker 3: a kind of standoff last year about the phone call
• 22:50
  Speaker 3: between the two of them. All the very wise Chinese
• 22:52
  Speaker 3: experts assured me there's no way that President She's going
• 22:56
  Speaker 3: to get on a Callway doesn't know exactly but what's
• 22:58
  Speaker 3: going to happen on the call or what's been agreed,
• 23:01
  Speaker 3: And in fact we were all surprised because we then
• 23:04
  Speaker 3: found out that a call had taken place. So I
• 23:07
  Speaker 3: just wondered, do you think there are some potential surprises
• 23:11
  Speaker 3: that come out of this where President She is kind
• 23:13
  Speaker 3: of maybe learning to play a different kind of game
• 23:18
  Speaker 3: with this different kind of president.
• 23:21
  Speaker 2: Yeah.
• 23:21
  Speaker 4: And I think with the call last year, the question
• 23:24
  Speaker 4: was you know what would get she on the phone?
• 23:28
  Speaker 4: And I think that it became clear in the weeks
• 23:31
  Speaker 4: and months afterwards that China was looking at that as
• 23:34
  Speaker 4: we are drawing a line in capping various export controls
• 23:38
  Speaker 4: that the US could put on China, and so is
• 23:42
  Speaker 4: that worth it? Yes, I think the Chinese do have
• 23:44
  Speaker 4: a pragmatic side there in terms of, as we said,
• 23:48
  Speaker 4: the bigger picture, which is, let's make sure we're seen
• 23:52
  Speaker 4: as a like for like superpower, that we're treated with
• 23:55
  Speaker 4: some respect, that there's reciprocity. If you do something, we'll
• 23:59
  Speaker 4: do something thing. And there is some convergence here as
• 24:03
  Speaker 4: well in the fact that China wants the straight of
• 24:06
  Speaker 4: four Moos open right now. They don't want to be
• 24:08
  Speaker 4: seen to endorse anything Trump is doing. I think they
• 24:12
  Speaker 4: completely opposed the war and the strikes, but they do
• 24:15
  Speaker 4: want the straight open. They don't want to be paying
• 24:18
  Speaker 4: tolls in waterways. It was the Indonesian finance most are
• 24:21
  Speaker 4: floating apparently saying it was joking that they were going
• 24:25
  Speaker 4: to consider a ship tax in the Malacca Strait where
• 24:27
  Speaker 4: a lot of Chinese oil transits.
• 24:29
  Speaker 3: I noticed that because we did an episode a few
• 24:31
  Speaker 3: weeks ago about how this was all this could potentially open. Well,
• 24:35
  Speaker 3: I think open the floodgates is probably the wrong metophor,
• 24:37
  Speaker 3: but you know that this straight and four moos issue
• 24:40
  Speaker 3: in the US not underpinning that shipping route did potentially
• 24:44
  Speaker 3: open the way to others being under challenged, not least
• 24:47
  Speaker 3: that one. So I was very interested to see that happen.
• 24:49
  Speaker 4: But sorry, I think that's right. So China wants freedom
• 24:53
  Speaker 4: of navigation, they want a lot of things the US wants.
• 24:56
  Speaker 4: They've benefited immensely from free and been traded across the world,
• 25:01
  Speaker 4: and they've managed to take advantage of that, probably better
• 25:04
  Speaker 4: than any other country. So there is some convergence of
• 25:07
  Speaker 4: interests where they can align on those things. China, of
• 25:10
  Speaker 4: course wants to you know, not condone that. And there's
• 25:13
  Speaker 4: a political element to that too. So last time when
• 25:16
  Speaker 4: Trump was there, he got a private tour of the
• 25:18
  Speaker 4: Forbidden City and at dinner with she and in a
• 25:22
  Speaker 4: military display. So yes, there might not be any huge
• 25:25
  Speaker 4: breakthroughs in the relationship, But how does China treat those
• 25:30
  Speaker 4: sorts of optical things. What is the tone of the statement.
• 25:34
  Speaker 4: How much does the language on Taiwan change? For instance,
• 25:37
  Speaker 4: does it roll out the red carpet for Trump, does
• 25:39
  Speaker 4: she smile? What are the interpersonal reactions like? And I
• 25:42
  Speaker 4: think that message for China's is much more complicated in
• 25:46
  Speaker 4: this kind of environment. And so how they play that
• 25:49
  Speaker 4: the tone of it will be very interesting to watch.
• 25:52
  Speaker 4: But China does keep their eye on the ball in
• 25:54
  Speaker 4: the eye and that is essentially, you know, keeping the
• 25:58
  Speaker 4: commerce party in che keeping the economy stable, handling all
• 26:02
  Speaker 4: the various domestic problems that they have at home. And
• 26:06
  Speaker 4: you've got to remember too, there's a party Congress next
• 26:09
  Speaker 4: year that's essentially an election year in China for all
• 26:11
  Speaker 4: intentsive purposes. There's a lot of chocking for positions going
• 26:15
  Speaker 4: on now. She himping has gotten rid of most of
• 26:17
  Speaker 4: his top generals, which indicates there's a lot of turbulence
• 26:21
  Speaker 4: under the surface of what we see. And so God
• 26:24
  Speaker 4: knows what problems she is dealing with at home right now?
• 26:27
  Speaker 4: Does he need? You know, he would like a stable world,
• 26:31
  Speaker 4: and so that's the incentive to go forward, even if
• 26:34
  Speaker 4: it's not optimal.
• 26:35
  Speaker 3: As I said, well, we would be looking for all
• 26:37
  Speaker 3: of those if the summit goes ahead, and if it
• 26:40
  Speaker 3: doesn't go ahead, we will look back on this conversation
• 26:42
  Speaker 3: and say it was all very clear in the outlines
• 26:45
  Speaker 3: of what you were both saying. So, Jenny Welch, Doantein, Kate, thank.
• 26:48
  Speaker 4: You very much, Thank you, thank you very much.
• 26:57
  Speaker 3: Thanks for listening to Trumponomics from Bloomberg. It was hosted
• 27:00
  Speaker 3: by me Stephanie Flanders. I was joined by Bloomberg's executive
• 27:03
  Speaker 3: editor for economics and politics coverage in Asia, Dan Tang, Kate,
• 27:08
  Speaker 3: and Jennifer Welch, chief geoeconomics analyst for Bloomberg Economics. Trumponomics
• 27:13
  Speaker 3: was produced by Summersadi and Moses and Dam and sound
• 27:16
  Speaker 3: design was by Blake Maples and Kelly Gary, with special
• 27:20
  Speaker 3: thanks this week to Amy Morris. Please to help others
• 27:23
  Speaker 3: find us and enjoy this show, please rate it and
• 27:27
  Speaker 3: review it highly wherever you listen to podcasts.